Description

Exploring performance attribution, the process of decomposing the return generated by a portfolio manager to better understand how they have been able to generate their performance against the benchmark, with the aim of recognizing where their skills lie and adjusting instructions given to portfolio managers for future periods accordingly.

Learning Objectives

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1. Determine what is meant by performance attribution.
2. Recall how performance attribution enables investors to decompose the returns generated by a portfolio manager.
3. Calculate the asset allocation effect.
4. Calculate the stock selection effect.
5. Calculate the interaction effect.
6. Use the factor tilt attribution method.